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GST THRESHOLD FIXED AT 20 LAKH BUT IS IT ADEQUATE ?

In the first meeting of GST council certain decisions were taken at by consensus and not by voting. In a big step towards the implementation of GST, the Centre and the states agreed on two crucial issues:

i) Revenue threshold limit for exemption from GST, and

ii) Sharing of administrative powers between the Centre and States.

Revenue threshold for GST exemption fixed at Rs 20 lakh for all States except north-eastern and hill States wherein the limit is Rs 10 lakh.

After reading this news ,many service provider are happy as turnover limit under service tax was 10 lakh but wait ,meaning of turnover has been changed as per model GST law(MGL) .Further 20 lakh limit also includes sale of material also.

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Persons liable to take a Registration under the Model GST Law?

Any supplier who carries on any business at any place in India and whose aggregate turnover exceeds threshold limit as prescribed in a year is liable to get himself registered. However, certain categories of persons mentioned in Schedule III of MGL are liable to be registered irrespective of this threshold. An agriculturist shall not be considered as a taxable person and shall not be liable to take registration. (As per section 9 (1))

What is aggregate turnover?

As per section 2 (6) of the MGL, aggregate turnover includes the aggregate value of:

(i) all taxable and non-taxable supplies,

(ii) exempt supplies, and

(iii) exports of goods and/or service of a person having the same PAN.

The above shall be computed on all India basis and excludes taxes charged under the CGST Act, SGST Act and the IGST Act.

Aggregate turnover does not include value of supplies on which tax is levied on reverse charge basis, and value of inward supplies.

Present Limit of 10 lakh under service tax is covered only Taxable Services but 20 Lakh limit under GST includes non taxable and exempted supplies also.

Cases in which registration is compulsory irrespective of threshold LimitContd. on Page-2

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As per paragraph 5 in Schedule III of MGL, the following categories of persons shall be required to be registered compulsorily irrespective of the threshold limit:

a) persons making any inter-State taxable supply;

b) casual taxable persons;

c) persons who are required to pay tax under reverse charge;

d) non-resident taxable persons;

e) persons who are required to deduct tax under section 37;

f) persons who supply goods and/or services on behalf of other registered taxable persons whether as an agent or otherwise;

j) an aggregator who supplies services under his brand name or his trade name; and

k) such other person or class of persons as may be notified by the Central Government or a State Government on the recommendations of the Council.

So from the above it is clear that 20 lakh limit under GST is lesser than limit of 10 lakh under service tax as it also includes non-taxable and exempted supplies. (read FAQ on GST registration )

OTHER DECISIONS TAKEN IN MEETINGDual control over small traders

The issue of dual control over small traders has also been resolved. States will get exclusive control over all dealers up to a revenue threshold of Rs 1.5 crore. For traders above Rs 1.5 crore, a mechanism will be worked out wherein one dealer will be regulated either by the Central government or the state government.

Center Govt control on Service provider

However, given the lack of expertise among the states to handle service providers, the Centre will get control over all the 11 lakh service tax registered dealers irrespective of their revenue levels.

All cesses will be merged in GST:

All cesses like krishi kalyan cess, swach bhart cess etc will be merged in GST rate.

Composition scheme Limit fixed at 50 Lakh

The council has fixed limit for composition scheme at 50 Lakh. Small taxpayers with an aggregate turnover in
a financial year up to [Rs. 50 lakhs] shall be eligible for
composition levy. Under the scheme, a taxpayer shall
pay tax as a percentage of his turnover during the year
without the benefit of ITC. The floor rate of tax for CGST
and SGST shall not be less than [1%]. A tax payer opting
for composition levy shall not collect any tax from his
customers. Tax payers making inter- state supplies or
paying tax on reverse charge basis shall not be eligible for
composition scheme.

The next meeting of GST council will be held on 30 September, 2016 which will decide on the draft rules and on area-based exemptions. However, the tax rates will be decided in the meeting to be held from 17-19 October, 2016.